A Formula for Success in China's Dynamic Chemicals Market

A Formula for Success in China's Dynamic Chemicals Market

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China's chemicals industry is changing and digitalizing faster than ever, creating both challenges and opportunities for multinational companies. Thomas Luedi, a partner with Bain's Chemicals practice, describes a three-part strategy for multinationals to compete with local companies and expand market share, retain talent and increase innovation.

THOMAS LUEDI: Digitization is happening faster in China than in many other markets—and not only in the B2C space but also increasingly in the B2B space. And it has a huge impact on the chemicals industry and how chemicals products are being sold.

For example, we see a number of chemicals-dedicated online portals coming up, competing with the more traditional chains. And chemicals companies are also using existing partners that are available across the entire range of the supply chain to more effectively sell their products and reach customers across the vast market of China.

University graduates traditionally wanted to join multinational companies to learn a new set of capabilities and get opportunities to work outside of China. Increasingly, they merely use multinational companies as a training platform and quickly move over to local companies, lured by fast career development and attractive packages.

Now, these shifts, you know, having fundamental impact on the China chemicals markets, create a lot of challenges for multinational companies. However, they equally create a set of opportunities that they can capture. First of all, multinational chemicals companies should look at China as their home market. They should aspire to have similar market shares in China as they have in their traditional home markets.

Then they need to localize. They need to localize their R&D platform, they need to localize their go-to-market models and they need to localize their supply chain in order to be cost competitive, in order to be fast to market and in order to develop the products that are most wanted by Chinese companies.

And finally, in order to win, multinational chemicals companies will have to commit to China, will have to regain leadership in the domestic market to make sure that the top university graduates want to make a career in their company and not go to the competition.